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Lenovo meets vow to break even after Motorola buy

Paul Withers
March 10, 2016

Prospects for 2016 are “extremely encouraging” as manufacturer aims to expand global presence

Lenovo is set to significantly expand its global brand presence this year after fulfilling its promise to break even within four to six months after buying Motorola.

According to the manufacturer’s mobile senior marketing director for EMEA Marcus Frost (pictured), the mass restructuring undertaken in recent months and bringing the two businesses under one umbrella is starting to pay dividends.

Last month, Lenovo said it broke even financially within its Mobile Business Group (MBG) during the final quarter of last year, with sales of $3.2 billion – up from $2.7 billion in the previous quarter, with Motorola contributing $2 billion (up from $1.2 billion). Pre-tax loss fell sharply to $30 million from $217 million in the previous quarter.

Although shipments for the three months to December 31, 2015 were down 18.1 per cent to 20.2 million, 83 per cent of shipments were made outside of China – up from 75 per cent in Q2. There was ‘hyper-growth’ in India and Indonesia of 206 per cent and 318 per cent respectively.

Lenovo acquired Motorola for £1.82 billion in November 2014, with the manufacturer’s new parent vowing to restore the business to profitability within 18 months after several consecutive quarters of financial losses under Google’s ownership.

In August however, Lenovo announced it would be cutting 3,200 jobs – or 10 per cent of its white collar staff – after its mobile business lost nearly $300 million in the three months ending June 30. The job cull was aimed at saving Lenovo $1.35 billion annually, which it said it has now achieved in its most recent results.

Bright prospects
Frost said this positivity shows the mobile business has “turned a corner”, and with the company now nearing a return to profitability, the prospects for 2016 are extremely encouraging.

“Together as Lenovo’s Mobile Business Group, we finally broke even in the last quarter,” said Frost. “We are making money and have managed to get the business in great, healthy shape.

“We have focused on staying in tune with what consumers need, innovate on our products, and making very savvy business decisions in terms of which geographies to enter and working with the right partners.

“We have turned a corner. We have streamlined a lot of the business and now that we have got it into great condition, the prospects for 2016 are looking very bright.”

Frost claims that with both Lenovo and Motorola strong in different global markets, bringing them together in the smartphone space has obvious benefits in expanding the overall company’s reach.

Lenovo smartphones are on sale in 40 countries within EMEA, and the top five in Europe (UK, France, Spain, Germany and Italy), which covers three quarters of the market in terms of both value and volume. Other countries products are ranged in including all of the Nordics, Benelux and Portugal.

He said Lenovo smartphones have been traditionally strong in Eastern Europe the Middle East and parts of Africa, while Moto has always performed well in Western Europe.

Therefore, Lenovo can introduce both brands into alternate countries. For example, Moto-branded smartphones will go on sale in Russia next month.

Frost also claimed that expanding its global reach and building success will be helped by the fact that it has smartphones to cater for all price bands and multiple
consumer groups.

“We’re building a very strong business. With our combination, we can introduce the Moto and Vibe brands into Western Europe and vice versa, without having to change partner or geographic structure too radically.

“It will be challenging but quite exciting as well. The Moto brand is for those looking for high-quality products at the high-end while the Vibe brand is for those looking for the best value for money from the low and mid-tiers. We have multiple products that cover multiple price points whereas others may not.”

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